Second long question Firm 1 and Firm 2 compete in the same product market by setting quantities ql and 9-2, respectively. They have the same marginal cost c1 2 c2 2 4D. The market demand is p = 1240 Q, where Q = q1+ qg. 19. Suppose the game is played for one period. What are the equilibrium quantities? [a = l, q2 2 1mm [b = son, q; 2 sun { [c d [e = 400, q; = 4m (CORRECT ANSWER} l 9'1 l 9'1 i 91 = , a = l 9'1 i m: 20:}. w = 2m In questions 19-21, suppose that this game is repeated for innitely many periods. Firms have the same discount rate (5. Consider the situation in which the two rms are trying to implement a collusion scheme. With this intent, they employ the following grim-trigger strategy: in the rst period, each rm produces the collusion quantity; from period two onwards, the rm keep producing the collusion quantity as long as no rm has ever pro- duced any quantity other than the collusion quantity; otherwise, the rm plays the Nash Equilibrium of the stage game. As you will see, what T.raries from one question to another is the collusion quantity that each rm is supposed to produce. 2D. Let 62'\" be the joint quantity [that is, the sum of q] and 9-2} that maximizes the joint prots of Firms 1 and 2. Consider a collusive scheme in which each rm produces %. What is the range of discount rates 5 such that this collusion scheme can be sustained in an SPNE of the repeated game, assuming that the players follow the grim-trigger strategy described above? The options display numbers rounded to two decimal places